RE Investment News - October 2018

October Meeting

FLIPPING 100+ HOUSES A YEAR Lessons & Losses Along the way!

With

NATHAN BROOKS

Page 2

RE Investment News

MAREI.ORG/CALENDAR

THE CALENDAR OCTOBER MEETING

FLIPPING 100+ HOUSES LESSONS & LOSSES Nathan Brooks, a local real estate investor is on target to flip more than100 houses in Kansas City this year. Along the way from beginning his business and growing it to make over 8 figures, he has learned a thing or two. Join us on Tuesday, October 9th when Nathan will open up his playbook to show us the lessons he has learned and losses he has had in his journey.

Doors open at 6pm for Networking. Build your team with our Vendor Hall. Share a Deal or a Business Card on the Deal Table, Ask a Question of one of our Experts at our Genius Bar. Monthly Meetings held at the Holiday Inn at 8787 Reeder Road in Overland Park, KS. MAREI Members & First Time Guests who preregister attend for free. Non-Members and Internet Members pay $25 at the door or pre-register for $15 online. Networking 6 to 7.

Presentation 7 to 9. Meeting After the Meeting 9 to 11.

Mailing Address: 6709 W 119th #332 Overland Park, KS 66209 Phone: 913-815-0111 Web: MAREI.org Web: MAREIMember.com Email: Kim@MAREI.org Views and advertising expressed in the RE Investment News are not necessarily endorsed by Mid-America Association of Real Estate Investors.

The information contained within should not be construed as a reco mmendation for any course of acti on regarding financial, legal, or ac counting maters by Mid-America Association of Real Estate Investors.

Email to inquire about advertising opportunities or membership.

MAREI.org

NOVEMBER MEETING

SELF DIRECTED RETIREMENT PROBLEMS & SOLUTIONS Developing a strategy in order to appropriately save for retirement is a necessary action in today’s world. For the past 30 years, Americans have been following a method to save for retirement that is growing outdated.

Join us as we welcome Nathan Long, CEO of Quest IRA to the Tuesday, November 13 MAREI Meeting. He will share how you can grow your retirement through real estate and real estate lending using your self directed IRAs , 401ks and other accounts.

Over the next few weeks leading up to the meeting, be sure to catch a webinar or two on the basics of Self Directing from Quest.

Private Lending October 9th, Self Directing 101 October 10th and the Top 10 Myths about Self Directed IRAs on the 16th, details at QuestIRA.org

Page 3

real estate news Photo from Shutterstock.com

Eviction Changes: Coming Soon

Criminal Background Checks

Every property owner in the country learns very quickly that evictions are a very costly side of the rental business both for them as owners with a business and for their tenant. One of the reasons most work very hard to make sure they screen properly so the landlord—tenant relationship is a mutually beneficial relationship.

Criminal background checks of tenants remain a crucial protection for landlords, who still have much to learn about how to run them and interpret their results fairly.

In a movement started by the book Evicted: Poverty and Profit in the American City by Matthew Desmond, tenant advocacy groups started rallying for change. Fueled by the lack of affordable housing, cities councils are working to take away property owner rights rather than taking steps to increase available housing; Cities Councils across the country are working on new regulations to create:

Landlords are facing backlash from groups claiming the use of criminal background checks unfairly discriminates against prospective tenants. Reacting to a seven-page letter from the American Civil Liberties Union, the City of Savannah, Georgia, suspended a program in February of 2018 that allowed landlords to refuse occupancy to potential renters with criminal backgrounds. In New York City, the owners of an apartment complex have been in court since 2014 for declining to rent to people with criminal records.

The federal government joined the debate in 2016.

Now landlords and tenants are waiting on the courts to decide whether new guidance issued by the Department of Housing and Urban Development (HUD) goes too far—or far enough—to prevent unlawful discrimination.

•

Just Cause Eviction: Making it much harder to remove a month to month tenant without a very limited and specific set of circumstances, just wanting your property back, may not be enough.

•

Right-to-Council: Everyone has a right to legal counsel for criminal issues, so now, why not provide one for the tenant being evicted, for free.

•

Pay-to-Stay: This would remove any contractual obligations of the lease and require property owners to accept partial payment.

Avoid Disparate Impact: This is the theory that applying a rule equally to everyone can be discriminatory if a large portion of a protected class are affected.

•

Ownership Disclosure: Cities want to know the person responsible and want corporations to prove who owns the property.

Recent vs Old History: Landlords can still say “no” to felons, but should be more lenient toward those whose criminal history is far behind them. If you do

Page 4

Innocent until Proven Guilty: Arrests are not judgments, so they do not carry the weight of convictions.

RE Investment News

ban specific crimes, you need to have a written reason in your background check policy.

advise locals and visitors of the areas to avoid. Remember: elections have consequences.

Ban the Box: Many metros are pushing to remove the question from tenant applications as they have in Kansas City on employment applications. Some metros want to ban the ability to conduct any criminal background screening.

November’s Elections:

How’s the Economy Doing?

Seller Finance While the Seller Finance Coalition (SFC) has moved its focus to the US Senate with an advocacy campaign requesting Senators to support the language of HR 1360, the real focus is in the House Finance Committee as HR 1360 is in mark-up for a hearing.

If you have not sent your email advocacy to your congressman through National REIA’s Action Center (on NREIA’s website, under the legislative tab).

There is a pre-drafted letter there for your convenience.

HUD There are three critical issues in process of being reformed at HUD, aside from the Housing Choice Voucher program, they are: Disparate Impact, The Affirmatively Furthering Fair Housing Rule, and The Companion Animal aspects of Fair Housing. All three have been slated for review and recasting. The real key will be if the regulatory change is followed by a codification by the House and Senate, without that the rules are only as good as the current administration – and that isn’t good for predictability, business or society.

Tax Reform

As a real estate investor, you have a rare opportunity to get involved in the political process. Where most people can support a candidate with a yard sign at their own house, please consider your portfolio as a blossom of candidate support. Make a donation and get involved. Sitting this out may result in your community eventually ceding your street – and your property rights away. Talk with your local REIA leaders about ways you can get involved and make your voice heard – along with thousands across the nation!

New Tax Law & Meal Deductions The Wall Street Journal reports that IRS is looking to bring back the "non-travel" meals deduction. We should, for example, be able to write off meals with clients, investors, prospects, etc. This is a pleasant change from our interpretation of the law that most non-travel meals were no longer deductible.

The Journal states that "The IRS’s guidance is expected to take a tack that generally preserves the 50% deduction for the cost of meals with clients, according to the people familiar. It’s also expected to offer details on how the 50% meal write-off meshes with the new denial of entertainment deductions.

For example, if a business owner takes a client to a ballgame, the cost of the tickets isn’t deductible because the expense is for entertainment. If the owner buys hot dogs and drinks for himself and the client

Yes, Tax Reform started. And everyone who was left out or disaffected by the last reform is hard at work … complaining about the current system. There may be more tax reform, but it is about as likely as a budget…and really needs to be drafted in conjunction.

Rent Control The denial of the basic laws of supply and demand are fully in force with those who are gathering around the banner of “Housing as a Right.” Their mantra of affordable housing pairs nicely with demands for a higher minimum wage and free healthcare. However, the reality of the erosion of property rights and elimination of many entry level service jobs will have unintended consequences that will likely harm many of the unskilled, or limited skill sets, eliminating additional rungs of opportunity and stability on the ladder to success. How long before Inclusionary Zones are mandated not just for the low income, but no-income? San Francisco has already ceded control of several sections of the city to the homeless, offering instead a “poop map app” to Photo from ShutterStock.com

MAREI.org

Page 5

at the game, this expense could still be 50% deductible, the IRS is expected to say."

Marketing a House You Don’t Own Are you wholesaling houses? If you conduct your business with the model of buy it and sell it, then you can market your property for sale most places.

If you are a Realtor and wholesaling for sale by owner, as the owner and an agent you do need to remind people of that fact.

If you do not own the property, but are the listing agent with a valid Real Estate License and valid Listing Agreement with the owner, you can market the property as Realtors do.

But what if you don’t actually own it. You control it with a contract of some sort and you want to sell your position in that contract. We reached out to Attorney Jeff Watson who is very familiar with Real Estate Law and Wholesaling for the answer. He tells us “If you do not own it and do not have any contract on it, meaning you have not had the owner of the property sign anything, you have no right to market anything, the house or the non-existent contract.”

If you do have a contract, you can market somewhat, but posting house or contract for sale with photos and addresses on a public forum is something you should NOT do. Instead something like I have a contract on a 3 bed, 2 bath home in subdivision name in city name. Private Message me for more details and photos. Then when the person contacts you, email them privately with the address, photos and contract details.

Ben Carson on Affordability That we have a housing affordability crisis is undeniable. The nations most productive cities have sprawled as far as geography, and reasonable commute times, allow while the rising cost of labor, construction, and land has made what new homes are built more expensive than ever. Dr. Ben Carson, The HUD Secretary is on a mission to force states and localities around the country to pare back zoning regulations so that more housing can be built in America’s most economically vibrant localities. “We must look at increasing the supply of affordable housing by reducing onerous zoning regulations.”

Carson has identified the cause of the problem as government, and in this case, he has mountains of evidence to back up his claim.

August 2018 Market Update Rising home prices, higher interest rates and increased building material costs have pressured housing affordability to a ten-year low, according to the National Association of Home Builders. Keen market observers have been watching this situation take shape for quite some time. Nationally, median household income has risen 2.6% in the last 12 months, while home prices are up 6.0%. That kind of gap will eventually create fewer sales due to affordability concerns, which is happening in several markets, especially in the middle to high-middle price ranges.

Closed Sales increased 5.1 percent for existing homes and 5.5 percent for new homes. Pending Sales increased 11.1 percent for existing homes but decreased 17.2 percent for new homes. Inventory decreased 3.1 percent for existing homes but increased 7.0 percent for new homes.

The Median Sales Price was up 4.1 percent to $190,000 for existing homes and 4.8 percent to $366,725 for new homes. Days on Market decreased 14.0 percent for existing homes but increased 3.4 percent for new homes. Supply decreased 4.3 percent for existing homes but remained flat for new homes.

While some are starting to look for recessionary signs like fewer sales, dropping prices and even foreclosures, others are taking a more cautious and research-based approached to their predictions. The fact remains that the trends do not yet support a dramatic shift away from what has been experienced over the last several years. Housing starts are performing admirably if not excitingly, prices are still inching upward, supply remains low and consumers are optimistic. The U.S. economy is under scrutiny but certainly not deteriorating.

Photo from ShutterStock.com

Page 6

Details from Heartland MLS & KCRAR. See full report at www.KCRAR.org.

RE Investment News

SUCCESS HABITS That all top people share.

From article by Nathan Brooks on BiggerPockets.com

Habits are a powerful. They drive our emotions and the way we think, act, do business, and make our way through life. They operate in the backgrounds of our every move subconsciously. Habits unchecked can lead to unwanted outcomes that we don’t connect to the original cause. And unless we make a concerted effort to review, understand, and change them they can drive us outside of our awareness.

Those who make their way to the top don’t do so accidentally. Instead, they tend to share 13 key habits.

1. Don’t make excuses.

If things don’t go right on a project, don’t blame the problems on other people, especially subordinates.

Review the problem. What happened? Where did you, your team, your company, miss something?

Review the entire process. Be honest. Don’t blame others. Take ownership for where you could contrib-

MAREI.org

ute differently next time. Be accountable for changes that need to happen so those same issues don’t come up on future opportunities.

Tell your team how you will lead and help ensure this doesn’t happen again. They will appreciate your honesty, and you will build trust for the next project.

you achieve it?

2. Lead their team

4. Give their team credit for the win.

Remember that as the leader, it is your responsibility to lay out the vision and objective for your company, organization, or team. Period.

If you aren’t personally clear on the objective, there is no way your team can be. If you haven’t shared those objectives with your team both strategically and tactically, then your team doesn’t have a clear picture of why your goals exist.

3. Have clearly defined personal and business goals.

Set the goal. Create and implement the steps to achieve it. Think about what it means to you. What will it look like when the goals are reached? How will you feel when

The clearer the goal is, the more clear the path is to get it. The more clear the path is to get there, the easier it is to actually execute on.

Then, you also know when you’ve accomplished the stated goal.

Celebrate. And then set new ones.

We love it when a plan goes well.

Take a minute to talk through the play with everyone involved. These were the steps we took to get here.

This was our mission. Here are the 3-4 things we can improve on.

Looking back on the entire process, you guys did X, Y, Z very well.

Worked as a unit. Well done, team.

When the team gets the win, they are able to own their piece of that mission. This creates a sense of ownership of the problem, the opportunity, and the ultimate success.

5. Mastermind with like minded people.

Having people to bounce ideas off that you trust is vital. Meet with

Page 7

likeminded people, not so you can be in the same room with people who all agree, but so you can be amongst those who are motivated to learn and to grow as humans, investors, owners, innovators, and leaders.

You can find this in masterminds, friends meeting for a monthly breakfast, or fellow colleagues working for different companies.

Don’t know of something like this in your field or your area? Create it.

Find the time and the space to grow in your role and in your capacity and skill as a leader. Learn from others.

6. Allow subordinates to challenge them.

Create a working environment where those who work with you are able to bring up issues to you, even if you are the “boss.” If your team isn’t able to bring up real issues, you are setting your entire team up for failure. As the leader, you might be too close to the problem. Or you might be so far away from the problem that you literally don’t know it exists.

Teach your team how to more effectively communicate these issues by having a forum and safe place publicly to share. Then, make sure your next statement is, “I hear you loud and clear, and thank you for bringing it up. What do you suggest we do to deal with this issue?”

7. Read books frequently.

Get inspired and learn new ideas from books. Nearly all the very successful people who I know, whom I’ve read about, and who have inspired me personally are readers.

Books have a way of taking you down a path that teaches you about your own life or business.

Not sure what to read? Check out top 10 business or self-development books. Ask others for great books they are reading. Check out books on Audible that you can listen to with search topics you are interested in. Any way you do it, make time and space to learn and grow. You will be a wiser person.

8. They challenge themselves daily.

Doing things you are already good

Page 8

at is easy. But life is a totally different experience when you routinely put yourself in situations that make you uncomfortable. That might be speaking in public or starting a conversation with a stranger. Maybe you hire a teacher and learn to play a musical instrument.

It’s so easy to get wrapped up in issues or petty problems. Keep your sights on what really matters. This is a practice, a behavior. Journal, meditate, a review mentally what you have to be thankful for.

Do something that is challenging you. Grow and learn from the person you were yesterday to the person you want to be tomorrow. Life is about doing interesting things. Don’t be afraid to fail. Failing builds fortitude.

Start by writing out three or four things each morning you are thankful for. When we put ourselves in a state of gratitude regularly, we are able to more easily deal with issues that do come up. Instead of having a negative reaction, we can prime ourselves to more gracefully deal with issues (and with other people).

9. Limit TV and social media.

12. Exercise and eat well.

Turn off that device. There are so many people vying for your attention on television and online. Social media has its uses, but it can also form incredibly bad habits. Television is no different. You can waste hours and hours of precious time doing literally nothing.

Your mind and body will operate at their optimum state and feel best with nutritious eating and regular exercise. Food is fuel. It’s not to say the occasional cheat meal or snack isn’t OK. Have some fun. Eat the chocolate cake. Have that glass of wine. Just remember that it shouldn’t be your everyday habit.

Instead, be thoughtful regarding what you put in your life—books, music, sometimes nothing Work on the project you have been putting off. Cook dinner with your family and put your phone away.

Exercise is a vital part of the routine too. Everyone has a different sport or activity they like to do. But do something, and do it at least two or three times a week.

10. Know relationships are integral to their lives.

13. Give out help and mentor others.

Don’t make your family pay for your big goals and deadlines. Incredible opportunities do come up, and sometimes we have to put time in when we are growing a business or solving problems.

Giving is a powerful and incredible gift for both the recipient and the giver. Many successful people out there have related how giving actually brought more success and opportunity their way. Opportunities arise all the time when you are open, listening, and in tune with what is happening around you.

Maybe you feel you need to work harder to be more successful or make more money. But on the other hand, you aren’t able to relax and enjoy the company of your spouse or play with your kids.

We often hear “life is short” but don’t really listen. Find joy in playing more with your kids. Schedule a BBQ with your friends. Take your husband or wife on an impromptu date. If you miss all these opportunities while you’re working so hard for a better life, you’re missing the point altogether. Family and friends are deeply important and should be held sacred no matter how big your goals are.

Welcome the opportunity to share what you’ve learned. Help someone who is just starting to get into a business or skill you are good at.

Mentor and share in their journey.

You will be surprised by what kind of incredible return that selfless gift might have in store.

See the original article at the following link: https://www.biggerpockets.com/ renewsblog/habits-successfulleaders/

11. They practice daily gratitude.

RE Investment News

C O M M U N I C AT I O N S MEMBER’S BENEFIT MAREI offers a wealth of information on current issues at the local, state and national level through various communications to our members.

Pick the best media to stay up to date on your industry.

Email Newsletter: Once a week MAREI sends an REI (real estate investing) e update with the latest news, events and member properties.

Weekly Events Email: Once a week we send an email with all the local real estate events happening in the next week.

Weekly Property Leads: MAREI members can post their properties on the MAREI websites and once a week, the system sends out the latest properties.

Monthly Printed Newsletter: Each month we have the latest

MAREI.org

news, articles from our speakers and other guests, the latest MAREI events and our member business directory. This is emailed out via PDF and printed and handed out at the monthly meeting.

Social Media: We have a host of social media pages on Facebook, Twitter, LinkedIn and Google where we share the latest news in the industry.

MAREI Blog: Online resource where speakers and other guest articles, events, and industry news are posted.

Calls to Action: From time to time we need the help of our members in contacting legislators, making a phone call or sending an email. We notify all members via email and social media of these latest advocacy issues so they can take action immediately and share with their

circle of contacts.

Member’s may follow us on any social media to stay up to date and will be included in two different email databases to get the latest emails.

Member’s can control the number of emails they receive by changing what emails they are subscribed to using the links at the bottom of emails sent.

In Constant Contact you can sign up for Event Emails, the Weekly Email Newsletter, and our Advocacy Emails. In MAREIMember.com you can opt in to weekly property leads.

If you know of an important local update that all members need to know about, please submit your news tips to kim@MAREI.org.

Page 9

SELF DIRECTED IRAS What you need to know There is a lot of confusion over selfdirected IRAs and what is and is not possible. In this article I will discuss some of the most important things you need to know about selfdirected IRAs. 1) IRAs Can Purchase Almost Anything. A common misconception about IRAs is that purchasing anything other than CDs, stocks, mutual funds or annuities is illegal in an IRA. This is false. The only prohibitions contained in the Internal Revenue Code for IRAs are investments in life insurance contracts and in “collectibles.” Since there are so few restrictions contained in the law, almost anything else which can be documented can be purchased in your IRA. A “selfdirected” IRA allows any investment not expressly prohibited by law. Common investment choices include real estate, both domestic and foreign, options, secured and unsecured notes, including first and second liens against real estate, C corporation stock, limited liability companies, limited partnerships, trusts and a whole lot more.

Page 10

2) Seven Types of Accounts Can Be Self-Directed, Not Just Roth IRAs. There are seven different types of accounts which can be selfdirected. They are the 1) Roth IRA, 2) the Traditional IRA, 3) the SEP IRA, 4) the SIMPLE IRA, 5) the Individual 401(k), including the Roth 401(k), 6) the Coverdell Education Savings Account (ESA, formerly known as the Education IRA), and 7) the Health Savings Account (HSA). Not only can all of these accounts invest in non-traditional investments as indicated above, but they can be combined together to purchase a single investment.

3) Almost Anyone Can Have a Self-Directed Account of Some Type. Although there are income limits for contributing to a Roth IRA, having a retirement plan at work does not affect your ability to contribute to a Roth IRA, and there is no age limit either. With a Traditional IRA, the fact that you or your spouse has a retirement plan at work may affect the deductibility of your contribution, but anyone with earned income who is under age 70

1/2 can contribute to a Traditional IRA. There are no upper income limits for contributing to a Traditional IRA. A Traditional IRA can also receive funds from a prior employer’s 401(k) or other qualified plan. Additionally, you may be able to contribute to a Coverdell ESA for your children or grandchildren, nieces, nephews or even my children, if you are so inclined. If you have the right type of health insurance, called a High Deductible Health Plan, you can contribute to an HSA regardless of your income level. With an HSA, you may deduct your contributions to the acount and qualified distributions are tax free forever! All of this is in addition to any retirement plan you have at your job or for your self -employed business, including a SEP IRA, a SIMPLE IRA or a qualified plan such as a 401(k) plan or a 403 (b) plan.

4) Even Small Balance Accounts Can Participate in NonTraditional Investing. There are at least 4 ways you can participate in real estate investment even with a small IRA. First, you can whole-

RE Investment News

sale property. You simply put the contract in the name of your IRA instead of your name. The earnest money comes from the IRA. When you assign the contract, the assignment fee goes back into your IRA. If using a Roth IRA, a Roth 401(k), an HSA, or a Coverdell ESA, this profit can be tax-free forever as long as you take the money out as a qualified distribution. Second, you can purchase an option on real estate, which then can be either exercised, assigned to a third party, or canceled for a fee. Third, you can purchase property in your IRA subject to existing financing or with a nonrecourse loan from a bank, a hard money lender, a financial friend or a motivated seller. Profits from debtfinanced property in your IRA may incur unrelated business income tax (UBIT), however. Finally, your IRA can be a partner with other IRA or non-IRA investors. For example, one recent hard money loan we funded had 10 different accounts participating. The smallest account to participate was for only $1,827.00!

5) Caution: There Are Restrictions on What You Can Do With Your IRA. Although as noted above in paragraph 1 the Internal Revenue Code lists very few investment restrictions, certain transactions (as opposed to investments) are considered to be prohibited. If your IRA enters into a prohibited transaction, there are severe consequences, so it is important to understand what constitutes a prohibited transaction. Essentially, the prohibited transaction rules were made to discourage certain persons, called disqualified persons, from dealing with the income and assets of the plan in a self-dealing manner. As a result, disqualified persons are prohibited from directly or indirectly entering into or benefiting from your IRA’s investments. The assets of a plan are to be invested in a manner which benefits the plan itself and not the IRA owner (other than as a beneficiary of the IRA) or any other disqualified person. Investment transactions are supposed to be on an arms-length basis. Disqualified persons to your IRA include, among others, yourself, your spouse, your parents and other lineal ascendants,

MAREI.org

your kids and other lineal descendants and their spouses, and any corporation, partnership trust or estate which is owned or controlled by any combination of these persons. It is essential when choosing a custodian or administrator that the company you choose is very knowledgeable in this area. Even though no selfdirected IRA custodian or administrator will give you tax, legal or investment advice, the education they provide will be critical to your success as a self-directed IRA investor.

6) Some IRA Investments May Cause Your IRA to Owe Taxes – But That May Be Okay. Normally an IRA’s income and profits are exempt from taxation until a distribution is taken (or not at all, if it is a qualifying distribution from a Roth IRA). However, there are three circumstances when an IRA may owe tax on its profits. First, if the IRA is engaged in an unrelated trade or business, either directly or indirectly through a non-taxable entity such as an LLC or a limited partnership, the IRA will owe tax on its share of Unrelated Business Income (UBI).

Second, the IRA will owe taxes if it has rental income from personal property, such as a mobile home not treated as real estate under state law (but rents from real property are exempt from tax if the property is debt-free). Finally, if the IRA owns, either directly or indirectly, property subject to debt, it will owe tax only on the portion of its income derived from the debt, which is sometimes referred to as Unrelated Debt Financed Income (UDFI). This may sound like something you never would want to do, but a more careful analysis may lead you to the conclusion that paying tax now in your IRA may be the way to financial freedom in your retirement. For example, one client made a net gain of over 1,000% in less than four months after her IRA paid this tax. This is definitely a topic you will want to learn more about, but it is not something you should shut your mind to before investigating whether the after tax returns on your investment would exceed the return you might otherwise be able to achieve in your IRA.

7) An Inherited Roth IRA Can Give You Tax Free Income Now No Matter What Your Age. Many people know that a qualified distribution from a Roth IRA is tax free.

To make the distribution qualify as tax free, it must be distributed after the IRA owner has had a Roth IRA for at least 5 tax years and after one of four events occurs – 1) the IRA owner is over age 59 ½, 2) the IRA owner becomes disabled, 3) the IRA owner dies and the distribution is to his or her beneficiary, or 4) the distribution is for a first-time home purchase, either for the IRA owner or certain close family members.

Although the neither the original Roth IRA owner nor his or her spouse has to take a distribution (assuming the spouse elects to treat the IRA as their own), non-spouse beneficiaries of a Roth IRA do have to take distributions, normally over their expected lifetimes. However, once the five year test is met, those distributions are tax free, regardless of the age of the IRA beneficiary!

Even a $100,000 Roth IRA left to a 6 year old beneficiary may generate as much as $80,496,367 in lifetime tax free distributions if the IRA can sustain a yield of 12%, which is very possible with a self-directed IRA. 8) 2010 Brought an Incredible Gift From Your Goverment. Most people who understand the benefits of a Roth IRA really want one, but many people have not been able to qualify for this incredible wealth building tool because of income limitations which restrict the eligibility of a person to contribute to a Roth IRA or to convert pre-tax accounts like Traditional IRAs into a Roth IRA. In 2010 the rules for conversions will changed so that anyone, regardless of income level, are eligible to do a Roth conversion. Now anyone who has a Traditional IRA (including a SEP IRA), a SIMPLE IRA which has been in existence for at least two years, or a former employer retirement plan such as a 401(k) or a 403(b) can convert those into a Roth IRA and can then begin to create tax free wealth for their retirement. Even if you do not currently have an IRA but are eligible to contribute to a Traditional IRA, the contribution can be made

Page 11

and immediately converted into a Roth IRA. This truly is one of the most exciting tax planning opportunities to come along in a very long time!

9) There Are Millions of Dollars Available to Finance Your Real Estate Deals Right Now. We are in a very exciting time for wise real estate investors. There are a lot of super real estate bargains out there right now, but it can be very difficult for investors to get financing – unless they know the secret of private financing. There are billions of dollars of lazy IRA money sitting on the sidelines waiting for the right investment, because many people are very afraid of the stock market. Included among the many things people can invest in with a self-directed IRA are real estate secured loans or even unsecured loans. Shakespeare wrote in his play Hamlet, “Neither a lender nor a borrower be, for a loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” I believe Shakespeare was wrong, but he might be forgiven since he did not have the advantage of knowing about self-directed IRAs. You can benefit from your knowledge of self-directed IRAs either by having your IRA be a private lender or by borrowing OPI – Other

Page 12

People’s IRAs – for your real estate transactions. Networking is the key to success in the area of private lending or borrowing, but there are things you must know to do it properly.

10) Use Options to Dramatically Boost Your Small IRA. Options are one of the most powerful and under-utilized tools in real estate investing today, and they work beautifully within a self-directed IRA. The consideration for the option and the property being optioned can be almost anything, not just real estate. Once an IRA owns an option, it can 1) let the option lapse (which at times is the right answer), 2) exercise the option and acquire the property, 3) assign the option for a fee (assuming the option agreement allows for assignment) or 4) agree to cancel the option for a fee with the property owner, thereby getting paid not to buy the property! Options are very flexible and can be designed to fit almost any situation. One client paid $5,000 from his Roth IRA for an option which he later canceled for a fee of over $35,000. Then he took that money, bought a property at a foreclosure auction for cash, and later sold the property for $70,000 with $5,000 down and a $65,000

seller-financed note. By using the option he was able to take his $5,000 Roth IRA and turn it into a $70,000 Roth in less than a year!

Truthfully there are many more things that you should know about self-directed IRAs. To learn more, attend one or more of Quest IRA’s many free networking and educational events. You can get the entire schedule of events in addition to playing pre-recorded webinars by going to our website at www.QuestIRA.com. Happy investing!

Reprinted with permission from H.Quincy Long, an attorney with a Certified IRA Services Professional CISP designation and the president of Quest IRA. His brother and business partner Nathan Long, CEO of Quest IRA will be joining us at the November MAREI meeting to share more information on Self Directing.

Be sure to visit www.QuestIRA.com to find out the latest virtual events so you can learn more about the basics of Self Directing, common myths about Self Directing and Private Lending from your Self Directed Account.

RE Investment News

Eliminate the odor at the source. Safe to use around people, pets and the planet. OdorXit.com Two new discounts for members. Receive 25% off on all OdorXit and 10% on all new Podio Accounts. Details in the Member Benefit’s Guide.

Log into MAREIMember.com for full details today.

Your workflows, structured & smarter Try the customizable work management solution real estate investors trust.

MAREI.org

Page 13

THE WAY TO WEALTH BRRRR Strategy Today as I was marketing one of our flip houses on social media I posted something about this being a good rehab flip or a BRRRR property. Most of the people got it and jumped right on wanting more information but a few people said “Kim, you need to proof your posts, you meant to say Airbnb, not BRRRR.” My first response was why the heck would anyone want to rent a house in Raytown on Airbnb and my second response was, what gives, you been living under a rock? But as the day progressed I found a few other people that have no idea what BRRRR means.

Let’s take a look.

While the strategy seems to be made famous on the internet by Bigger Pockets, I am pretty sure that real estate investors have been using this strategy for 100’s of years. Since the very first rental house was bought, renovated, rented and refinanced so the inves-

Page 14

tor could go out and do it all over again.

paying their rent, out of which you can pay the mortgage.

All those letters stand for Buy, Renovate, Refinance and Repeat. It’s a fairly straight forward concept.

REFINANCE the property. Some might buy the property with all of their own cash or with some sort of renovation loan or a combination of the two. Once it is renovated and rented, the investor then refinances it with a local lender to get a long term loan with a low monthly mortgage payment.

BUY a property for rental that needs a bit of TLC so you can get a great price or some other distressing factor so you can buy it a bit under value. Ideally you want to buy it so that your purchase price and all your renovation will be 70% or less than the value of the property once you get it all fixed up.

RENOVATE the property for optimum rental value. You want it to be nice so it attracts great renters.

But you don’t want the renovations so over the top that they cost too much. See the 70% Rule in the buy section. You want purchase price and renovation to be 70% of the overall value of the home once fixed up.

RENT it out to a paying client.

Make sure you screen properly and manage the tenant so they keep

In this strategy all of the underlying debt is paid off and all the money the investor has in the deal is recouped. As long as they followed the 70% rule.

Now you have a cash flowing rental property, with infinite returns, because you have no money what so ever in the transaction.

REPEAT the entire process.

This is where things start making you wealthy. Do one deal. Get it running smoothly and get all your money or your credit back.

Now you can go to it again. And

RE Investment News

again and again. Eventually building up a portfolio of rental properties to replace your current job.

If this is a totally new concept for you, be sure to search online for BRRRR and you will find a wealth of information on the strategy, multiple case studies and even a calculator to help you crunch the numbers.

•

How to find a lender to refinance the transaction?

•

Where to get the down payment money?

•

Where to find the deal?

•

Estimating repairs and rent?

It may be possible to find a few investors who can help you with most aspects of the entire process if you are willing to pay a bit more and leave a bit of your down payment in the transaction. These investors are turn key providers. They do the buy part, the rehab part, the rent up part, they sell it to you and then they manage the property and the tenant for you. In this version, you may have to put 15 to 20% down and get a loan from a lender.

•

Making offers on property?

Finding the Money

•

Getting the rehab funding?

•

How to get the property renovated in a timely manner?

•

How to find and screen good tenants?

A few people may say this all sounds great, but I have no money for down payment, no money to do the traditional BRRRR, so what can I do.

•

How to manage those tenants in an ongoing basis?

•

What happens if something goes wrong?

Now I know a few people who are thinking, I can do this on the side around my day job. It seems fairly simple, but there are a lot of moving parts to learn:

MAREI.org

There are several options here as well:

2. Learn how to flip houses for a year or two. If you can flip 4 or 5 houses for an average of $5,000 assignment fee, you can quickly have a down payment for properties.

Keep in mind that each Wholesale fee you earn will be taxed as ordinary income unless you take steps to lessen that burden.

And keep in mind that to hold rental property, you will probably want a bit extra in reserves for when something does not go as planned.

Do you need help putting this strategy into practice? Come out to the next MAREI meeting and start asking questions. We have a wealth of knowledge of all kinds in the room at every meeting and on our online forums. I would suggest coming to our group on Facebook as well to ask questions.

Go to www.MAREI.org/Facebook .

1. Save up the money, get a raise, get a bonus, sell something and over time build up that down payment.

Page 15

FREE Real Estate BUSINESS PLAN Every real estate investing business should have a plan Whether you are just starting in the real estate industry or you are looking to scale your business, having a plan of attack is vital.

If you haven’t taken the time to sit down and map out a strategy for your business, download this FREE guide specifically designed to help real estate investors narrow their focus and create a business plan.

This real estate investor business plan template covers 1.

2.

3.

4.

5.

Executive Summary Business Description Competitive Analysis Building Credibility Marketing Strategy

Go to www.MAREI.org/BusinessPlan to request your free sample business plan.

Page 16

RE Investment News

With MAREI Business Members Save time and money by starting with service providers who already know your business. Who can solve problems as they arise to help you get the deal completed on time and for maximum profit.

Accountant

Auction Company

Coleman Accounting Service Bob Coleman www.ColemanAcctg.com 913-787-0308

Auction.com Rachel Bailey www.Auction.com 816-797-6875

Mid America Tax Planners Ahmad Malik www.Accounting-USA.com 913-210-4765

Building Supplier

Appraisal Ladys Appraisal Service Kathy Allen-Grey www.LadysAppraisal.com 816-678-2794

Attorney Anderson & Associates Evictions / Collections Julie Anderson www.MOKSLaw.com 816-931-2207 Rick Davis Legal Real Estate Law Rick Davis www.RickDavisLegal.com 913-283-8300

MAREI.org

DeMayo Enterprises Wholesale Cabinets Mark Yanda www.DeMayoEnterprises.net 913-980-4260 Joe’s Carpet / Weber Flooring Jerry Ratway www.WeberFlooring.com 913-236-3680 The Home Depot George Neal 816-461-9583 2% Rebate / 20% Off Paint Details in Member Benefits

Contractor Hearth Masters Fireplace / Masonry Gene Padgitt www.ChimKC.com 816-461-3665

Genesis Home Restorations Mold Remediation Terry Amerine GenesisHomeRestorations.com 913-270-0812 HCS Restoration KC, LLC Mike Peace HCSRestorationLLCKansas.com 913-731-6537 NuLook Custom Finishes Cabinet Refinishing Carol Baldwin www.NuLookFinishes.net 913-385-2574 Under Pressure Property Services Rehab, Maintenance, & Staging Dallas Kidd www.MyUnderPressure.com 913-274-9555

Insurance Agema Insurance Fred Dickinson www.AgemaIns.com 913-543-8116 Arcana Insurance Insurance for Investors NREIA.ArcanaInsurance HUB.com 877.744.3660 Page 17

Self Directed IRA

Marketing

Property Manager

Equity Trust Company TrustETC.com/NationalREIA FREE Training 844-732-9404

Constant Contact Email & Social Media Marketing FREE Trial MAREI.org/ConstantContact

Home Rental Services Paul Branton www.Home4Rent.com 913-627-9543

Investor Carrot Investor Websites Free Training & Discounts www.MAREI.org/IC

Lotus Key Homes Loni Louis Bernard www.LotusKeyHomes.com 816-838-7368

Pat Live Answering Service Discounts www.MAREI.org/PatLive

M & M Property Pros Michael & Michele Bellman www.MMPropertyPros.com 816-490-6745

Zoom Video Conferencing www.MAREI.org/Zoom

Realtor

Lending Crossroads Investment Lending Hard Money Britton Asbell / Doug Harris www.KCLend.com 913-800-8226 House Traders Monthly Meeting Flat Branch Home Loans Morgtgage Banker Beth Langston FlatBranchHomeLoans.com 816-479-5841 x 1148 Geneva Financial Mortgage Loans Charlie Fitzgerald GenevaFI.com/CharlieFitzgerald (800) 843-8650 Investors Choice Funding Hard Money Scott Ficinus InvestorsChoiceFunding.com 816-668-7223 Longhorn Investments Hard Money Mike Minor www.LongHornInvestments.com 913-209-8630 Merchants Mortgage Mushy Money Susan Aubin www.MerchantsMtg.com 303-514-0815 North Oak Investments Hard Money Tommy Nigro www.NorthOakInvestment.com 816-249-1001 Revolver Finance Hard Money Jeremy Hanna www.RevolverFinance.com 316-880-1611 Worcester Financial' Hard Money Taryn Kendrick www.WorcesterFinancial.com 816-291-4146

Page 18

Office Supply Office Depot / Office Max www.OfficeDepot.com Discount Link & Card in Member Benefits Package Pest Control

Crown Realty Rich Melton RichMelton.CrownRealty.com 913-215-9004 Realty Resource Scott Tucker www.RealtyResourceKC.com 816-284-7844

BedBugTraps.com Stop Bed Bugs Discounts for Members

Show-Me Real Estate Dan Hartman www.Show-MeRealEstate.com 816-532-6101

Properties

Rent Collection

Bridge Turn Key Investments Nathan Brooks www.BridgeTurnkey.com 913-276-4114

National Credit Systems Specializing in Collections www.NationalCreditSystems.com

McKinnis Real Estate Turn Key Provider Nick McKinnis McKinnisRealEstateInvestments.com 816-914-2614 KCInvest Investment Properties Scott & Kim & Don Tucker www.KCInvest 913-735-0018 Pride Properties Wholesale Marcus Bray & Matt Bray www.PridePropertiesHomes.com 913-213-5370 Deal Makers Monthly Meeting

Screening Rent Perfect Tenant Screening Plus Heather Johnson www.RentPerfect.com 877-922-2547 Discounts www.MAREI.org/RP Servicing Escrow Services Inc. Loan Servicing Nationwide www.EscrowServ.com

RE Investment News

Title Company Accurate Title Company Dave Green www.AccurateTitleCo.com 913-338-0100 Alpha Title Mary Kellogg www.AlphaTitleInc.com 913-498-8999

Get Connected: www.MAREI.org

Visit our website for events, recent newsletters, member properties and our business directory. www.MAREIMember.com Visit our Member’s Only site to join, register for events, access benefits and discounts and to post properties.

Trash Out

www.Facebook.com/groups/KCREI

1-800-Got- Junk Trash Pick Up www.1800GotJunk.com Discounts in Member Benefits

Join the online discussion. Post a property, ask a question, share knowledge and expertise.

1-800-JunkPro Trash Pick Up & Dumpsters Clint Pringle www.Junk.pro 816-935-7078 Junk Luggers Eco Friendly Junk Removal Olivia Jones www.JunkLuggers.com 816-905-2204 Get Listed Want to be listed in our directory?

For as little as $135 a Quarter or $499 annually, join MAREI as a business member.

Details at MAREI.org.

Member Spotlight: Marcus Bray Pride Properties Marcus and his team at Pride Properties buy and sell houses. If you are looking for an investment property be sure to register as a buyer at on their website:

www.PridePropertiesHome.com They also host a monthly event on the Plaza in Kansas City for area wholesalers to bring available properties to pitch to attendees. So if you have a property to sell or if you are looking for investment property to purchase, attend a KC Deal Maker’s Session on the first Tuesday of the month. Details about the event can be found online at www.Meetup.com/Kansas-City-DealMaker-Sessions And if you are new to investing and have a question, be sure to seek Marcus out at the next meeting.

PridePropertiesHome.com

913-213-5370

MAREI.org

Page 19